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Cassie Geister
on Nov 16, 2024

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The government builds a new water-treatment plant. The owner of the company that builds the plant pays her workers. The workers increase their spending. Firms from which the workers buy goods increase their output. This type of effect on spending illustrates

A) the multiplier effect.
B) the crowding-out effect.
C) the Fisher effect.
D) the wealth effect.

Multiplier Effect

The proportionate increase in final income that results from an injection of spending (initial increase in spending), typically influencing the level of national income and output.

Government Builds

Refer to initiatives or infrastructure projects undertaken by a government to develop or enhance the country's physical assets and services.

Water-treatment Plant

A facility that processes water to remove contaminants and make it safe for drinking and other uses.

  • Gain insight into the multiplier effect and its role in economic activities.
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KM
Krupa mistryNov 16, 2024
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